The tyranny of the diploma
2004-02-28 11:50 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
archershipshttp://www.forbes.com/forbes/1998/1228/6214104a_print.html
The tyranny of the diploma
AT 16 XAVIER DELACOUR dropped out of Albany Academy, a private day school. He went to work hawking Egghead software out of a store in Albany, N.Y. for $6 an hour. Explains Delacour: "My head was set more towards getting my career set up." A quick learner, he was soon writing software code for a local car dealer. Delacour was only 17 when he was hired by a Marlborough, Mass.-based startup, Attune, LLC, where he's helping design a gadget that writes original music and plays it on the Internet in CD quality. Attune plans to license the gadgets to Web sites, which will sell them at $90 each.
At an age when most kids enter college, with their earning years still well in the future, Delacour, a soft-spoken teen, has his own apartment and should earn $50,000 next year, plus a 10% share of the company's profits.
Bill Gates did go to college, but for only three years. He dropped out of Harvard to devote himself full time to computer work. The time he saved from college -- and additional years spared from grad school -- gave Gates a head start in building what was to become the world's greatest fortune. It's not inconceivable that had he gone for a Ph.D., someone else today would be the world's richest person.
Dell Computer Corp.'s Michael Dell did graduate from college, but by all accounts he spent most of his time at the University of Texas at Austin building and peddling PCs.
Kenneth Johnson, 28, realizes that if he had not dropped out of Wichita State University he might not have founded Dial-A-Waiter, his restaurant delivery service. Some warned he would end badly without a sheepskin. "Now I can kind of laugh and say 'I told you so,'" he says.
Looking for something to do, Johnson noticed that few local restaurants would deliver to people after a hard day's work. He persuaded six Wichita restaurants to let him handle take-out orders, using for capital $20,000 of credit card debt. Today Johnson has ten drivers delivering everything from tacos to sushi for 40 Wichita restaurants. He charges customers the menu price plus $6. That surcharge plus a 30% to 35% discount from the restaurant covers his costs and leaves him with a nice profit, which he supplements by charging $7,500 a pop to show folks in other cities how to start Dial-A-Waiter outfits. "I sort of created my own career," he crows.
Not all successful dropouts take the entrepreneurial route. Two years ago Yale-bred Federal Express founder Fred Smith tapped William G.
Fraine, then 38, as senior vice president for worldwide sales. Fraine joined the firm as a clerk in 1979 when he was 21. His only degree is a high school diploma from Don Bosco Prep in Boston. Today Fraine supervises 4,000 of the $13.3 billion company's employees in 211 countries, earns an estimated $300,000 a year and has vested stock options worth several million dollars.
Stories like these are causing some kids and their parents to have second thoughts about the necessity of that sheepskin. Sean Levatino was an Albany Academy classmate of Xavier Delacour. Sean's folks encouraged Sean, 19, to attend Worcester (Mass.) Polytechnic Institute. But now they wonder: "Are we doing the right thing to push him to get a college degree?"
His mother counts the cost: The degree could run Dr. and Mrs.
Levatino $120,000. If they were instead to invest that money in municipal bonds paying 5%, Sean would have a nest egg of $500,000 by his 50th birthday. That's far more than most college grads can hope to accumulate in that time. And the prospective income from that $500,000 is a lot more than the theoretical premium that college grads own over nongrads.
Nevertheless, the Levatinos and their son are doing the conventional thing. So are most of their contemporaries -- including John Magennis, age 17, a high school senior in Dedham, Mass. He makes $65,000 a year from his own internet marketing company, yet still plans to go to Babson College next fall. "I need something to fall back on,"he says.
Since World War II the U.S. college population has risen sevenfold, to 15 million, converting higher education -- a privilege only 15% of the U.S. population enjoyed before WWII -- into a $200 billion industry serving the masses. Credit the higher-education industry with brilliant marketing. University economists wield numbers showing that each year of additional schooling ups earnings. They argue that a college degree is a hell of a fine investment. Few people dare challenge these numbers.
But anecdotal evidence is growing that there is a lot wrong with the numbers. Consider this: Fifty-eight members of The Forbes 400 either avoided college or ditched it partway through. These 58 -- almost 15% of the total -- have an average net worth of $4.8 billion. This is 167% greater than the average net worth of the 400, which is $1.8 billion. It is more than twice the average net worth of those 400 members who attended Ivy League colleges.
Could it be that the nongrads got such a head start in their careers that the others never caught up? Or are those numbers just a fluke?
Either way, there is growing evidence in the country that college diplomas aren't what they're cracked up to be when it comes to bringing in the bucks.
Educrats insist those men are exceptional. They cite the Census Bureau: College grads earn on average $40,478 a year, 77% more than high school grads ($22,895) and far more than high school dropouts ($16,124).
But economist Robert Reischauer of the Brookings Institution in Washington, D.C. puts a slightly different spin on these figures. He argues that they are skewed by the fact that smarter kids gravitate more easily to college than dumber kids and that this makes the profitability of higher education into a self-fulfilling prophecy. This so-called ability bias may account for as much as 30% of the college premium, admits Educational Testing Service economist Anthony P. Carnevale.
In a way, hiring practices in the government and in private industry almost force young people to go to college. Time was when a high school diploma was pretty good proof that the holder had received a basic education. No more. Too many high schools certify kids who can barely read or reckon, with the result that employers today want to see a college diploma as evidence of basic literacy.
Consciously or not, legislation pushes young people into college. In Abe Lincoln's time lawyers didn't go to law school; they apprenticed to practicing lawyers. In recent decades four-year college degrees have been made compulsory for architects, pharmacists, physical therapists and elementary school teachers.
In his 1962 classic, Capitalism and Freedom, Milton Friedman denounced this educational bloat as a drain on the economy. Other scholars have picked up on the message. "[College] became the licensing agency for Americans who wanted to enter the professions," writes Marvin Lazerson in Annals of the American Academy of Political & Social Sciences. In the U.S., 23.6% of adults hold college degrees, against only 11.6%in Germany, 10.7%in the U.K. and 10.2%in France.
No wonder those extra years of education here seem to pay off according to the universally accepted numbers: The attendance is mandatory if you hope to practice many of the most lucrative professions. Would lawyers earn less if they could get their degrees in four years instead of seven? The question answers itself.
Today perhaps 30% of the work force is in jobs that by law or custom require at least a four-year college diploma. State and federal agencies also require degrees for better-paying jobs. No one can hope to get such a job without passing through the college gate and leaving a lot of money there.
By the law of unintended consequences the U.S. Supreme Court has contributed to this credentialism that forces young people to acquire a diploma by whatever means and of whatever quality. In Griggs v. Duke Power Co., in 1971, the court effectively outlawed the use of IQ tests in hiring. This left businesses to rely on possession of a college diploma as the basic proof that job applicants possessed at least rudimentary literacy and intelligence.
This might well have disqualified Bill Gates from working at most major U.S. companies after he dropped out of Harvard. It probably would have made getting a good job tough for Delacour. The institutional barriers are high for those without the sacred sheepskin."I don't think they [noncollege grads] can get in the door," admits Thomas Gallagher, 54, head of proprietary trading at Wall Street's CIBC Oppenheimer. He had a learning disability and quit college after six months. How did he get his foot in the door? He started as a runner for an odd-lot house and worked his way up. Today, for its entry-level training programs, Oppenheimer will consider only those job applicants who have a college diploma.
"In place of the bigotry of race has arisen a new bigotry of schooling," writes George Gilder in Wealth and Poverty, calling this system "a schoolmarm meritocracy." A more cynical interpretation is that it's hard to get a good job unless you buy an expensive admission ticket from the higher education monopoly.
However, in so greatly expanding their market, the panjandrums of higher education may have commoditized their product. More than 50% of Americans 25 and over who entered the work force in the past six years had college degrees. No surprise that the wage premium for graduates over nongrads has slipped. In 1992 it was 60% for men under 35. By 1996 the premium was down to 54%.
Yet many college grads find themselves saddled with debts of $20,000, and even more if graduate school is involved. For graduates who don't earn top salaries, those loans are a heavy burden. Even by the arithmetic that the college establishment likes to use, a college education is no longer a great investment for many people.
A hefty 21% of all degree-holders who work earn less than the average for high school grads. That's especially true among service workers -- waiters, ticket takers and daycare workers -- which is what many college grads finally become. "It is the earnings of managers, sales representatives, lawyers and doctors that have caused college-educated earnings to rise," says Educational Testing Service's Carnevale. He says that if these top earners were taken out of the equation, college grads would be little better off economically than high school grads.
"The B-minus student may be better off not going to college," admits University of Tulsa history professor, Paul A. Rahe. What should they do? The Army, says Rahe, who ticks off the pluses:Getting paid rather than paying for something you're not using, learning a marketable skill, disclipline, and an opportunity to mature. "Perhaps even a challenge to mature," he says.
Christopher Morrison didn't join the Army, Navy or Marines, but he did skip college. At 30, he is a co-owner of a Scottsdale, Ariz. software company called PLPDigital Systems.
At age 17 he left high school because he was too busy designing software for clients, like the $18 million (revenues) Barrett-Jackson classic car auction. Morrison also invented gadgets such as a battery- powered gizmo to track lawyers' billable hours.
At 19, he convinced client Michael Addison, a Harvard M.B.A., to back him with $15,000. "I don't think a college degree is either necessary or sufficient for success," says Addison.
Ten years later PLP is housed in its own 11,000-square-foot building, does $6 million in revenues, has 36 employees and is debt-free. "I don't think I need to go back to school to achieve success," says Morrison.
Okay, maybe you still want to see your kids or grandkids go to college. Maybe she has a burning desire to study something. Or maybe he wants to prepare for a career in a specialized field and needs the generalized knowledge.
But great investment? It's quite possible that Christopher Larson's 1981 Princeton degree may have cost him at least a billion dollars.
Larson was one of Microsoft's earliest employees and worked there during his summers off from high school. According to Gates, the biography by Stephen Manes and Paul Andrews, Gates begged Larson to drop out of Princeton and join the company full time. Larson denies anyone ever pressed him, though the option of dropping out was always there. Larson finished his degree and then joined. He got some founders' stock, but not as much as he might have.
If you know an ambitious kid who isn't sure about college, give her a copy of America's Top Jobs For People Without College, by J. Michael Farr (JIST Works). It's a useful antidote to the brainwashing we all get these days from the Education Industry.
The tyranny of the diploma
AT 16 XAVIER DELACOUR dropped out of Albany Academy, a private day school. He went to work hawking Egghead software out of a store in Albany, N.Y. for $6 an hour. Explains Delacour: "My head was set more towards getting my career set up." A quick learner, he was soon writing software code for a local car dealer. Delacour was only 17 when he was hired by a Marlborough, Mass.-based startup, Attune, LLC, where he's helping design a gadget that writes original music and plays it on the Internet in CD quality. Attune plans to license the gadgets to Web sites, which will sell them at $90 each.
At an age when most kids enter college, with their earning years still well in the future, Delacour, a soft-spoken teen, has his own apartment and should earn $50,000 next year, plus a 10% share of the company's profits.
Bill Gates did go to college, but for only three years. He dropped out of Harvard to devote himself full time to computer work. The time he saved from college -- and additional years spared from grad school -- gave Gates a head start in building what was to become the world's greatest fortune. It's not inconceivable that had he gone for a Ph.D., someone else today would be the world's richest person.
Dell Computer Corp.'s Michael Dell did graduate from college, but by all accounts he spent most of his time at the University of Texas at Austin building and peddling PCs.
Kenneth Johnson, 28, realizes that if he had not dropped out of Wichita State University he might not have founded Dial-A-Waiter, his restaurant delivery service. Some warned he would end badly without a sheepskin. "Now I can kind of laugh and say 'I told you so,'" he says.
Looking for something to do, Johnson noticed that few local restaurants would deliver to people after a hard day's work. He persuaded six Wichita restaurants to let him handle take-out orders, using for capital $20,000 of credit card debt. Today Johnson has ten drivers delivering everything from tacos to sushi for 40 Wichita restaurants. He charges customers the menu price plus $6. That surcharge plus a 30% to 35% discount from the restaurant covers his costs and leaves him with a nice profit, which he supplements by charging $7,500 a pop to show folks in other cities how to start Dial-A-Waiter outfits. "I sort of created my own career," he crows.
Not all successful dropouts take the entrepreneurial route. Two years ago Yale-bred Federal Express founder Fred Smith tapped William G.
Fraine, then 38, as senior vice president for worldwide sales. Fraine joined the firm as a clerk in 1979 when he was 21. His only degree is a high school diploma from Don Bosco Prep in Boston. Today Fraine supervises 4,000 of the $13.3 billion company's employees in 211 countries, earns an estimated $300,000 a year and has vested stock options worth several million dollars.
Stories like these are causing some kids and their parents to have second thoughts about the necessity of that sheepskin. Sean Levatino was an Albany Academy classmate of Xavier Delacour. Sean's folks encouraged Sean, 19, to attend Worcester (Mass.) Polytechnic Institute. But now they wonder: "Are we doing the right thing to push him to get a college degree?"
His mother counts the cost: The degree could run Dr. and Mrs.
Levatino $120,000. If they were instead to invest that money in municipal bonds paying 5%, Sean would have a nest egg of $500,000 by his 50th birthday. That's far more than most college grads can hope to accumulate in that time. And the prospective income from that $500,000 is a lot more than the theoretical premium that college grads own over nongrads.
Nevertheless, the Levatinos and their son are doing the conventional thing. So are most of their contemporaries -- including John Magennis, age 17, a high school senior in Dedham, Mass. He makes $65,000 a year from his own internet marketing company, yet still plans to go to Babson College next fall. "I need something to fall back on,"he says.
Since World War II the U.S. college population has risen sevenfold, to 15 million, converting higher education -- a privilege only 15% of the U.S. population enjoyed before WWII -- into a $200 billion industry serving the masses. Credit the higher-education industry with brilliant marketing. University economists wield numbers showing that each year of additional schooling ups earnings. They argue that a college degree is a hell of a fine investment. Few people dare challenge these numbers.
But anecdotal evidence is growing that there is a lot wrong with the numbers. Consider this: Fifty-eight members of The Forbes 400 either avoided college or ditched it partway through. These 58 -- almost 15% of the total -- have an average net worth of $4.8 billion. This is 167% greater than the average net worth of the 400, which is $1.8 billion. It is more than twice the average net worth of those 400 members who attended Ivy League colleges.
Could it be that the nongrads got such a head start in their careers that the others never caught up? Or are those numbers just a fluke?
Either way, there is growing evidence in the country that college diplomas aren't what they're cracked up to be when it comes to bringing in the bucks.
Educrats insist those men are exceptional. They cite the Census Bureau: College grads earn on average $40,478 a year, 77% more than high school grads ($22,895) and far more than high school dropouts ($16,124).
But economist Robert Reischauer of the Brookings Institution in Washington, D.C. puts a slightly different spin on these figures. He argues that they are skewed by the fact that smarter kids gravitate more easily to college than dumber kids and that this makes the profitability of higher education into a self-fulfilling prophecy. This so-called ability bias may account for as much as 30% of the college premium, admits Educational Testing Service economist Anthony P. Carnevale.
In a way, hiring practices in the government and in private industry almost force young people to go to college. Time was when a high school diploma was pretty good proof that the holder had received a basic education. No more. Too many high schools certify kids who can barely read or reckon, with the result that employers today want to see a college diploma as evidence of basic literacy.
Consciously or not, legislation pushes young people into college. In Abe Lincoln's time lawyers didn't go to law school; they apprenticed to practicing lawyers. In recent decades four-year college degrees have been made compulsory for architects, pharmacists, physical therapists and elementary school teachers.
In his 1962 classic, Capitalism and Freedom, Milton Friedman denounced this educational bloat as a drain on the economy. Other scholars have picked up on the message. "[College] became the licensing agency for Americans who wanted to enter the professions," writes Marvin Lazerson in Annals of the American Academy of Political & Social Sciences. In the U.S., 23.6% of adults hold college degrees, against only 11.6%in Germany, 10.7%in the U.K. and 10.2%in France.
No wonder those extra years of education here seem to pay off according to the universally accepted numbers: The attendance is mandatory if you hope to practice many of the most lucrative professions. Would lawyers earn less if they could get their degrees in four years instead of seven? The question answers itself.
Today perhaps 30% of the work force is in jobs that by law or custom require at least a four-year college diploma. State and federal agencies also require degrees for better-paying jobs. No one can hope to get such a job without passing through the college gate and leaving a lot of money there.
By the law of unintended consequences the U.S. Supreme Court has contributed to this credentialism that forces young people to acquire a diploma by whatever means and of whatever quality. In Griggs v. Duke Power Co., in 1971, the court effectively outlawed the use of IQ tests in hiring. This left businesses to rely on possession of a college diploma as the basic proof that job applicants possessed at least rudimentary literacy and intelligence.
This might well have disqualified Bill Gates from working at most major U.S. companies after he dropped out of Harvard. It probably would have made getting a good job tough for Delacour. The institutional barriers are high for those without the sacred sheepskin."I don't think they [noncollege grads] can get in the door," admits Thomas Gallagher, 54, head of proprietary trading at Wall Street's CIBC Oppenheimer. He had a learning disability and quit college after six months. How did he get his foot in the door? He started as a runner for an odd-lot house and worked his way up. Today, for its entry-level training programs, Oppenheimer will consider only those job applicants who have a college diploma.
"In place of the bigotry of race has arisen a new bigotry of schooling," writes George Gilder in Wealth and Poverty, calling this system "a schoolmarm meritocracy." A more cynical interpretation is that it's hard to get a good job unless you buy an expensive admission ticket from the higher education monopoly.
However, in so greatly expanding their market, the panjandrums of higher education may have commoditized their product. More than 50% of Americans 25 and over who entered the work force in the past six years had college degrees. No surprise that the wage premium for graduates over nongrads has slipped. In 1992 it was 60% for men under 35. By 1996 the premium was down to 54%.
Yet many college grads find themselves saddled with debts of $20,000, and even more if graduate school is involved. For graduates who don't earn top salaries, those loans are a heavy burden. Even by the arithmetic that the college establishment likes to use, a college education is no longer a great investment for many people.
A hefty 21% of all degree-holders who work earn less than the average for high school grads. That's especially true among service workers -- waiters, ticket takers and daycare workers -- which is what many college grads finally become. "It is the earnings of managers, sales representatives, lawyers and doctors that have caused college-educated earnings to rise," says Educational Testing Service's Carnevale. He says that if these top earners were taken out of the equation, college grads would be little better off economically than high school grads.
"The B-minus student may be better off not going to college," admits University of Tulsa history professor, Paul A. Rahe. What should they do? The Army, says Rahe, who ticks off the pluses:Getting paid rather than paying for something you're not using, learning a marketable skill, disclipline, and an opportunity to mature. "Perhaps even a challenge to mature," he says.
Christopher Morrison didn't join the Army, Navy or Marines, but he did skip college. At 30, he is a co-owner of a Scottsdale, Ariz. software company called PLPDigital Systems.
At age 17 he left high school because he was too busy designing software for clients, like the $18 million (revenues) Barrett-Jackson classic car auction. Morrison also invented gadgets such as a battery- powered gizmo to track lawyers' billable hours.
At 19, he convinced client Michael Addison, a Harvard M.B.A., to back him with $15,000. "I don't think a college degree is either necessary or sufficient for success," says Addison.
Ten years later PLP is housed in its own 11,000-square-foot building, does $6 million in revenues, has 36 employees and is debt-free. "I don't think I need to go back to school to achieve success," says Morrison.
Okay, maybe you still want to see your kids or grandkids go to college. Maybe she has a burning desire to study something. Or maybe he wants to prepare for a career in a specialized field and needs the generalized knowledge.
But great investment? It's quite possible that Christopher Larson's 1981 Princeton degree may have cost him at least a billion dollars.
Larson was one of Microsoft's earliest employees and worked there during his summers off from high school. According to Gates, the biography by Stephen Manes and Paul Andrews, Gates begged Larson to drop out of Princeton and join the company full time. Larson denies anyone ever pressed him, though the option of dropping out was always there. Larson finished his degree and then joined. He got some founders' stock, but not as much as he might have.
If you know an ambitious kid who isn't sure about college, give her a copy of America's Top Jobs For People Without College, by J. Michael Farr (JIST Works). It's a useful antidote to the brainwashing we all get these days from the Education Industry.
no subject
Date: 2004-02-28 05:06 pm (UTC)I've been wasting time and money on college. I have a good job, and don't even really need the degree. Not only a good job, but a great career, awesome experience, and much potential for future advancement. I've found that industry certifications get me much farther ahead than a degree ever would. I've seen people with degrees that absolutely suck in this field.
My parents want me to finish college. Meh.
those are exceptional people
Date: 2004-02-28 05:34 pm (UTC)Sure, if you're 18 and you have a great business plan or an already going concern, strong future prospects, capital, and most importantly a network of people to help and support you - go ahead and start that business. But don't just drop out of college because you think school is lame, or because you know a millionaire who didn't get a degree.
Re: those are exceptional people
Date: 2004-02-29 02:57 am (UTC)I'd very much like to know others who were those 18 year olds and are now in their late 20s and going back to school (or not). It would be interesting to hear their opinion of the situation.
Re: those are exceptional people
Date: 2004-02-29 03:41 pm (UTC)Re: those are exceptional people
Date: 2004-03-01 05:40 am (UTC)no subject
Date: 2004-02-28 05:52 pm (UTC)no subject
Date: 2004-02-28 06:13 pm (UTC)no subject
Date: 2004-02-29 06:12 am (UTC)I'm not an entrepreneur and I never will be. I don't want to start my own business. I'm not a people person and I don't think I interview well. I think my degree helps a lot.
If I could go back, I surely wouldn't have taken 5 years to graduate. I was interning at computer companies 20 hours a week the whole time. That was my excuse. If I could go back in time, I would major in computer information systems instead of computer science and I'd graduate in 3 years.
That's what John Greaney did. He's the author of the Retire Early Homepage (http://www.retireearlyhomepage.com). John got his Civil Engineering degree in 3 years and started his career at 21. He retired at age 38.